Base Metals Insight Report - Sep 04, 2015 : Karvy Commodities

By  Paul Ploumis 04 Sep 2015  Last updated at  06:09:17 GMT

Most of the metals rebounded from last week's sixyear lows that were driven by fears that China's slowing economy could drag back global growth. Copper surged to the highest level, in more than three weeks,

Base Metals: Technical Recommendations:

Market Outlook: Most of the metals rebounded from last week's sixyear lows that were driven by fears that China's slowing economy could drag back global growth. Copper surged to the highest level, in more than three weeks, while the other metals followed the route, as bearish investors closed out positions amid a stock market recovery, stable US economic data and signals that European monetary stimulus could be extended. Moving ahead, Chinese market would remain being closed for today as well on account of the military parade and therefore the calmness in the base metals sector is likely to remain intact while the investors keenly await the nonfarm payrolls data from US. As per the recent updates, the US Midwest premiums for Aluminum have dropped by more than half this year to a three-year low, signaling relief for industrial users ranging from auto-parts producers to beer makers. Nickel on the other hand is getting additional support from Indonesia reinstating the export ban on the mineral ores, though this support is likely to remain short lived as the demand continues to tread along the bearish side. Overall, we recommend buying Copper, Aluminum from lower levels whereas recommend selling Nickel from higher levels. In case of Lead and Zinc, we expect both the metals to remain range bound for the day.

Aluminum: 3 Month forward LME:

• Aluminum 3M forward LME lurched back to life yesterday and settled at $1630 MT, up by around 1.88% from its

previous close.

• The inventories and cancelled warrants dropped by 8525 MT and 8025 MT respectively, giving a mixed cue for the metal.

However, the contango for the metal remained stable at $20.25 MT, earning the interest of the investors to indulge in

financing deals.

• As per updates, Aluminum the US Midwest premiums for Aluminum have dropped by more than half this year to a threeyear

low, signaling relief for industrial users ranging from auto-parts producers to beer makers.

• Overall, we recommend buying Al from lower levels for the day

Copper- 3 Month forward LME:

• Copper surged to the highest level, in more than three weeks and settled at $5246 MT, up by around 2.46% from its

previous close. The stable US economic data accompanied by signals that ECB may prolong its stimulus program

supported the rise in selective metals.

• The inventories at LME dropped by 1850 MT while the cancelled warrants shifted higher by 9150 MT, giving positive

cues for the metal. The backwardation of the metal at LME also rose to $18 MT, giving a positive outlook for Cu.

• Copper inventories in China’s bonded warehouses dropped 17% to 540,000 MT the smallest in almost two years as

traders moved metal to the domestic market amid slower sales from smelters.

• Overall, we recommend buying Cu from lower levels for the day.

Nickel- 3 Month forward LME:

• Nickel continued on its bourse to the higher side and settled at $10000 MT, up by around 1.32% from its previous close.

The stable US economic data accompanied by signals that ECB may prolong its stimulus program supported the rise in

selective metals.

• The inventories for the metal dropped by 366 MT while the cancelled warrants dropped by 3396 MT, giving a negative

cue for the metal. However, the contango for the metal remained shifted lower to $24 MT, lowering the appeal to trade

in for the investors.

• As per recent updates, Indonesia reiterated its export ban on the Nickel ore while the production from Philippines

continues to flood the market with enough Nickel. This ban has supported Nickel, however we expect it to be short lived.

• Overall, we recommend selling Nickel from higher levels for the day

Zinc and Lead: 3 Month forward LME:

• LME 3M fwd Lead traded around $1718 MT, up by 0.17% while Zinc shifted lower yesterday and settled at $1811 MT,

from their previous close.

• In case of lead, the inventories at LME declined by 3750 MT while the cancelled warrants also dipped by 3750 MT, pinning

the price for the metal on the downside. The contango for the metal at LME shriveled down to $12.5 MT, giving mixed

cues for the metal.

• While in case of zinc, the inventories at LME dipped by 225 MT, while the cancelled warrants dropped by 1750 MT, giving

a mixed to negative cue for the metal. While, the contango for the metal remained steady at $7.75 MT, sending mixed cues

for the metal.

• Overall, we expect both Lead and Zinc to remain range bound for the day.

Courtesy : Karvy Commodities